Oil Drops After China Abandons Economic Growth Target

Investing.com – Oil dipped on Friday morning in Asia, giving up its earlier gains after China failed to set its annual economic growth target.

Brent oil futures dropped 3.97% to $34.63 by 12:45 PM ET (5:45 AM GMT) and WTI futures slid 5.40% to $32.09 with investors calculating the impact on oil demand in the world’s second largest economy.

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China’s National People’s Congress kicked off earlier in the day after a two-month delay due to the COVID-19 virus. Premier Keqiang said in his annual report at the opening session that “We have not set a specific target for economic growth this year…This is because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the COVID-19 pandemic and the world economic and trade environment.”

Although the government failed to set the 2020 target, it pledged to issue CNY 1 trillion ($140.67 billion) of special treasury bonds to support regions hard hit by the virus.

China’s abandonment of the growth target, breaking years of tradition, “could be interpreted as putting less focus on infrastructure investment and could be viewed as negative for oil,” Stephen Innes, chief global market strategist at AxiCorp, told Reuters.

“The commodity market, in general, was looking for a bigger infrastructure pump from the NPC so there is bound to be an element of disappointment.”

But with OPEC+ and other producers adhering to pledged production cuts, and countries emerging from lockdowns, there are hopes that the black liquid will continue into a fourth week of gains.

Gasoline demand is expected to increase in the United States, with more states loosening lockdowns and the upcoming Memorial Day weekend kicking off the summer driving season.